Inside this issue:

• Notes & Notices
  
• Lyn Brailey Joins National Financial Counsellors’ Resource Service
  
• The New ITSA Inspector General in Bankruptcy: Ms. Veronique Ingram
  
• I Just Wanted One Horoscope: New Protections For Premium SMS Users
  
• Wesley Mission’s Financial Stress Report:
  A Summary of Findings
  Wayne Warburton
  
• The Law Matters: How Safe Are a Bankrupt’s Savings?
  Richard Brading
  
• An Up-To-Date Directory of Commonwealth Funded Financial Counselling Services
  
• Bankruptcy Update
  Anna Mandoki
  
• Round-Up
  News, views and information about financial counselling around Australia
  
• In the Media
  Snippets of interest and information found in the media        

   Notes & Notices

ANZ beefs up hardship response

A recent media release from the ANZ Bank suggests that they have improved and expanded their assistance measures for home loan, credit card and personal loan customers who are facing financial hardship, and in particular those who are struggling to meet repayments due to loss of employment. Such customers are encouraged to call the ANZ dedicated hardship team to discuss their specific needs.

The ANZ notes that their hardship team “has been trained specifically to support customers facing financial difficulty and to find the most appropriate measures,  including tailored repayments based on what customers can afford to pay, to assist them while they get back on their feet”.

The toll free hotline numbers are:

For ANZ customers: 1800 252 845
For Esanda customers: 1800 838 100

Financial counsellors with further questions can contact:

Gerard Brown
Group General Manager, Corporate Affairs ANZ
Email Gerard.Brown@anz.com
03 9273 4991

NAB Financial Counsellor Liaison Officer

Saskia ten Dam, from Townsville Community Legal Service, has informed Sharkwatch that the NAB has a Financial Counsellor Liaison Officer, Peggy Di Biase.

Peggy’s contact details are:

Tel: 1300 130 262
Fax: 03 9322 6254
Email: nabcare@nab.com.au  

Telstra to enhance mobile premium SMS customer safeguards

Premium SMS is a vexed area in telecommunications, generating a great many complaints. For example, people are often unaware that purchasing a single     service (such as a horoscope) may sign them up to an ongoing subscription to the service. In addition, many people complain that when they ask premium sms providers to stop sending services, the services often still continue, and they continue to be billed.

In response to these problems, Telstra has taken some past steps, including:

• Introducing a default monthly spending limit on  Premium SMS;
  
• Issuing a Service Provider Conduct Policy;
  
• Introducing a monitoring program where advertised Premium SMS services are “mystery shopped” and tested to check compliance against Telstra’s Conduct Policy; and
  
• Suspending a number of premium services as a result of unacceptably high escalated complaint levels.

Telstra have now taken additional steps to safeguard customers from unintentional subscriptions to Premium SMS services. These are:

1. Amending the Premium SMS Service Provider Conduct Policy to ensure that all subscription services have a double opt-in arrangement;
   
2. A new process to terminate providers that have had continued high and unacceptable complaint levels associated with their services, and
   
3. The development of an incentive arrangement which rewards service providers that maintain a good customer service record.

   Financial assistance for this Project was provided by the
   New South Wales Government from the Responsible
   Gambling Fund. The views expressed in this publication
   are solely those of the authors and do not represent the
   views of the Responsible Gambling Fund or of the New
   South Wales Government.

Wesley Community Legal Service gratefully acknowledge the sponsorship of LexisNexis, whose assistance has enabled our solicitors to have access to the Butterworths Direct Online package.

   Lyn Brailey Joins National Financial Counsellors’ Resource Service

The National Financial Counsellors’ Resource Service (NFCRS) provides resources, support and casework supervision for financial counselling services funded by FaHCSIA through the Commonwealth Financial Counselling (CFC) program. Until recently, there have been two staff at the NFCRS - Jennifer Gracie and Wayne Warburton. A recent increase in funding for the CFC has seen an increase in services across Australia (see pages 10-12 for an up to date directory of CFC-funded services) and an increase in the need for support and resources. For this reason, the NFCRS has been funded to employ an additional worker.

The NFCRS is delighted to announce that Lyn Brailey has been employed full time, and has already commenced work. We thought that Sharkwatch readers would like to know more about Lyn, so we have asked Lyn to provide a brief introduction.

Recently I joined the team of Wesley Mission, Surry Hills, at the NFCRS. Prior to this position I was working for The Salvation Army Moneycare as a full time Financial Counsellor at Campsie in Sydney.

Before discovering the world of financial counselling I was the director of an Import/Wholesale giftware business, based at Alexandria in Sydney. This consumed me for about 14 years. We supplied retail shops throughout Australia. I attended overseas trade fairs looking for exciting new products and then imported them into Australia for our retail markets. We also exhibited at various state Trade fairs in Australia. This was a very exciting time. A great team of people worked for me during this time and we grew the business together, until it was sold in 2005. It was then I discovered Financial Counselling.

Becoming a Financial Counsellor was explained to me one morning while I was training at Maroubra beach with a group of friends. Little did I know that a new world was about to open before me. I have found financial counselling to be very rewarding. I have learnt a lot, especially about the complex financial and emotional issues that people face every day, and have enjoyed assisting people to overcome these issues.

My current role with Wesley Mission has a variety of aspects that appeal to me apart from the financial counselling. I enjoy connecting with other CFC counsellors’ via email or telephone, and gaining a better understanding of the many issues (financial and otherwise) that face financial counsellors and their clients across all the states and territories within Australia. I enjoy that the NFCRS and CFC financial counsellors support and update information with one another. I am looking forward to helping to resource CFC-funded financial counsellors, and to meeting as many as possible face to face at the various state and national conferences.

It is important that we explore whether we are all experiencing similar changes within our industry, and ask each other questions about the different trends that are becoming evident. Are the issues become more complex? Are we seeing generational changes producing different issues as the younger generation become more technologically savvy?

Financial Counsellors face the 21st Century, an age of new technology, with younger generations appearing to be living life at a fast pace and wanting their goods now, regardless of their financial situation. Many will, of course, pay later, and this means that there will be interesting times ahead for all of us. For me - I feel inspired and motivated (but also cautious) as I move forward into this new era. As I move into this new position I hope we can all share our knowledge and experiences as a team of financial counsellors.

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   The New ITSA Inspector General in Bankruptcy: Ms. Veronique Ingram              

The Attorney-General Robert McClelland has recently announced the appointment of a new Chief Executive of the Insolvency and Trustee Service Australia (ITSA) and Inspector-General in Bankruptcy, Ms. Veronique Ingram.

Ms Ingram takes over from David Bergman, who has been the Acting Chief Executive and Inspector-General in Bankruptcy for the past few months.

Veronique Ingram’s appointment is for five years.

Ms Ingram has a Bachelor of Arts (Political Science) and a Bachelor of Laws from the Australian National University (ANU), as well as Graduate Management Qualifications in Managing People and in Marketing.

Ms Ingram was most recently the General Manager of the Financial System Division, Markets Group, in the Department of the Treasury.

From January 2005 to January 2008, she was the Australian Ambassador and Permanent Representative to the Organisation for Economic Cooperation and Development (OECD) in Paris. Prior to this she held several positions in the Treasury, including Chief  Adviser, International, Economic Group, and General Manager, Corporate Governance and Accounting Policy Division.

While at the OECD, Ms Ingram has held the position of Chair of the OECD Steering Group in Corporate Governance.

Ms Ingram has also been very actively involved in the Financial Stability Forum’s work on standards and codes and the Asia Pacific Economic Cooperation (APEC)’s work on corporate governance and financial reporting

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   I Just Wanted One Horoscope … New Protections For Premium SMS Users

How many of your clients have signed up to get just one horoscope and discovered too late (and many dollars later) that by obtaining one horoscope they had subscribed to an expensive and ongoing premium short message service (premium SMS)?

The Australian Communications and Media Authority (ACMA) recently announced its strategy for protecting premium SMS consumers.  This coincides with the   registration of a new Mobile Premium Services Code (MPSC) which came into force on July 1. In essence, the MPSC and ACMA announcement deliver the following protections regarding premium SMS providers: 

• ‘Double opt in’ whereby there need to be two confirmations of a request before the SMS service is delivered to a potential customer;
  
• Stricter rules about how advertisements and charges are displayed;
• Advertising aimed at children under 15 now banned;
  
• Improved complaint handling obligations;
  
• All mobile carriers must provide an option for barring premium SMS;
  
• All premium SMS providers must be registered, and face deregistration by ACMA for misconduct;
  
• A number of specific protections will be legislatively mandated;
  
• ACMA has developed a ‘coherent and comprehensive monitoring framework’ for premium SMS providers.

Remember, to stop a premium SMS subscription, just text STOP to the premium SMS service provider.

A full press release on the new code and ACMA stance can be found at: http://www.acma.gov.au/WEB/STANDARD/pc=PC_311730.

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   Wesley Mission’s Financial Stress Report:
A Summary Of Findings

Wayne Warburton
National Financial Counsellors Resource Service

Sydney’s Wesley Mission recently published its 2009 report on financial stress in the Sydney region. The full document, which can be downloaded free at http://www.wesleymission.org.au/News/FinStress/images/wesley_report.pdf, makes very interesting reading, with some groups faring better than expected in the current financial conditions, and others faring worse.

The research project follows up Wesley’s 2006 report Financial Stress and its Impact on the Individual, Family and Community, which provides an important reference point for comparison.

Overall, the report makes it clear that if conditions in Sydney are indicative of wider trends, many sections of Australian society are struggling in the current ‘global financial crisis’, with single parents being particularly hard hit.  Here is a summary of the findings:

The global financial crisis

Sydney, the focus of the Wesley Report, plays an important role in the financial stability of the national economy. It is the financial hub of Australia, represents almost 25 per cent of Australia’s Gross Domestic Product and is ranked 10th out of 215 cities in the Worldwide Quality of Life Index 2008.

Despite this apparent prosperity, the impact of the global financial crisis and looming recession is now hitting Sydney. There are numerous cases of people being squeezed out of the rental market due to the 12 interest rate increases since 2002, and many mortgage owners have been plunging deeper into debt. This problem is exacerbated by the fact that 20% of people who enter the world of borrowing find it impossible to ever get out.

How household composition affects financial stress

• Family households, whether with children or not, suffered less financial stress than other households.
  
• Most households did not draw up a budget or plan of their expenses.
  
• ~40% of single-parent households could never or almost never afford to pay the entire balance on their credit cards. In comparison, only 23 per cent of couples with or without children experienced this problem.
  
• One-third of couples with children were able to easily manage an increased rental/mortgage cost of $160 per month whereas almost half of single-parent families needed to make major sacrifices to meet this cost.
• Credit cards were used for financial relief: 30 % of respondents who owned one were easily able to raise $2000 in an emergency; 30 % of respondents who did not own a credit card found it very difficult to raise such a sum.
• The majority of respondents from all household structures did not seek advice when worried about money. Where advice was sought, it was limited to that provided by a spouse, family member or friends.

Financial Stress: The hidden human cost

• Most people (63%) did not seek advice about troublesome household finances even though ~80% of them felt more stressed when worried about money and ~40% only managed to break even for most weeks.
  
• When in need of financial counsel more than half (54%) of single-parent households turned to a family member. ~80% of single parents who are financially stressed experienced strain in family relationships. These findings support a theory that single parents are over-reliant on family members.
  
• Half of all single-parent households found that money problems badly affected their relationships with friends.
• Financial stress had a severe impact on the health of single parents (66%) and their ability think clearly (75%).
• Opportunities to relieve stress were limited for single parent households:
  38 % could not afford a holiday for just one week in the year
  35 % could not afford a night out even once a month.

The three issues that generated the most significant results were the effects of financial stress on:

1. spousal relationships 
2. other family relationships
3. the ability of people to think clearly when making decisions.

• Most men who only managed to break even on income and expenses most of the time had adverse relations with their spouses (72 %) while men who were able to save money at the end of most weeks experienced a smaller incidence (45 %) of negative spousal relations.
  
• Family problems were associated with income: 92% of respondents in the lowest income bracket had problems with family members. In comparison, 56% of respondents on low to middle incomes experienced negative relations with family members.
  
• Respondents on government benefits were more likely to experience problems with family members when stressed about finances (77%).
  
• A similar relationship was discovered between income, income source and the ability to think clearly as individuals on lower incomes and government benefits found it more difficult to think clearly when in trouble over money.

The following factors used as financial indicators had significant adverse effects on family relations and the ability to think clearly:

• Being unable to take a week’s annual holiday away from home (family relationships suffered for 59%; 70% were unable to think clearly)
  
• Inability to afford a night out once a month (family relationships suffered for 53%; 70 % were unable to think clearly)
  
• Inability to pay a utility bill on time (family relationships suffered for 62%; 68% were unable to think clearly)
  
• Sought financial assistance from family or friends (family relationships suffered for 62%; 65% were unable to think clearly).
  
• The importance of not only drawing up budgets but adhering to them was shown in the fact that 71% of people who only sporadically kept to budgets found it difficult to think clearly when worried about financial problems.

Comparisons with 2006 results

The 2008 Wesley Mission financial stress survey found that the overall financial situation was much bleaker for the residents of Sydney in 2008 than it was in 2006.

• 2008 saw a 9 per cent increase in borrowing from financial institutions – and a corresponding increase in the number of people who never prepared a household budget.
• The biggest changes were found in people’s answers to hypothetical questions about extra expenses.

- In 2006, ~66% of respondents found it easy to meet an extra $160 in monthly expenses; in 2008, ~50% respondents found it difficult to the meet the extra $160.
- The 3% of respondents who found the above $160 extra monthly imposition impossible to meet in 2006 rose to 7% in 2008.
- In 2006, 10% needed to make major sacrifices to raise $2000 at short notice but in 2008 that figure jumped to 18%.
- Between 2006 and 2008 there was a 4% increase in the number of respondents who could not raise $2000 in an emergency.

• Fewer people sought professional financial advice and more people (21% more) relied on advice from family members when worried about money.
  
• There was a 3% increase in the number of people who needed to borrow money from family and friends and a further 10% increase in those who were unable to pay household bills on time.

Implications for policy

A total of seven priority areas were identified as requiring urgent action. In terms of these areas, Wesley Mission made the following recommendations:

1. Provision and promotion of financial literacy
In essence it was recommended that financial literacy tools should be geared to the needs of various groups, publicised adequately, and made available to range of demographic groups, to schools and to school leavers;
2. Regulating the financial sector
Recommended culture changes to the finance sector, that payday lenders and similar be licensed, predatory lending be more tightly regulated, and that clear information about margin lending be made available;
3. Credit reporting and responsible lending
Recommended a national positive credit reporting system, regulation of lenders’ credit assessment criteria, a 3% increase to credit card minimum payments, and a reduction to bank loan exit fees;
4. Integration of services
Recommended that social services be integrated to  improve financial literacy education and access to NGO legal services for those financially at risk;
5. Affordable housing
Recommended a national taskforce to examine affordable housing and the viability of the British Mortgage Rescue scheme as a model for Australia;
6. Financial counselling
Recommended increased funding for financial counselling services, early intervention programs for single parent households (including housing close to support services), and better communications between the financial counselling, housing and employment  sectors;
7. Systemic change
Recommended the government review and regulate the level of private debt in Australia.

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   The Law Matters

Richard Brading
Principal Solicitor
Wesley Community Legal Service

How Safe Are a Bankrupt’s Savings?

Savings at the time of bankruptcy

At the time of bankruptcy, a client may have a small amount of money in their financial institution. Usually the Official Trustee in Bankruptcy leaves the money alone if the amount is small. However, there are some private trustees who demand the last cent that is sitting in the bank account. 

Section 125 of the Bankruptcy Act 1966 (“the Act’) requires financial institutions to freeze the bankrupt’s account as soon as they ascertain that an account holder is an undischarged bankrupt and to notify the trustee details of the account. Upon receipt of advice about the account, the trustee may claim all or part of the moneys in the account. Alternatively, the trustee may advise the financial institution that the trustee makes no claim to the moneys in the account and has no objection to the bankrupt operating the account. Likewise, if the financial institution does not hear from the trustee after a month of notifying the trustee, then it can unfreeze the account at the end of the month so the money becomes available to the bankrupt. 

The freezing of accounts has caused significant hardship to bankrupts who have suddenly found that they were unable to access their pay or government benefit after it was deposited into their bank account shortly before or after bankruptcy.

ITSA has now clarified its position in a new Practice Statement called “Application of Section 125 of the Bankruptcy Act 1966 Where Estate is Administered by the Official Trustee.”  It can be downloaded from the ITSA website at: http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/about+us-%3Eitsa+practices+&+policies-%3EOTPS+Documents/$FILE/Bank+Accounts.pdf.

The new Practice Statement acknowledges that the freezing of accounts pursuant to s.125 of the Act can lead to hardship or inconvenience for bankrupts trying to access funds to meet living expenses.

When a bankrupt estate is administered by the Official Trustee, the new Practice Statement explains that the Official Trustee will not require financial institutions to freeze a bankrupt’s account if it has a balance of less than $2000 as long as that account is used for the receipt of predominantly personal income.  The Official Trustee will not take that money from the bankrupt’s account.  The money will remain available to the bankrupt.

However, there are exceptions. Should payments be received into the account which takes the balance well in excess of $2,000, the financial institution is encouraged to notify the Official Trustee of this so that the source of the funds can be ascertained by the Official Trustee. If the money in the account is not predominantly accumulated (“saved”) personal income, but rather something else, such as a gift or proceeds of sale of non-personal assets, then the Official Trustee may take the balance of the account, even if it is less than $2,000.

It is important to note that the Practice Statement only applies to bankrupt estates administered by the Official Trustee.  Whilst it provides a precedent of good practice for private trustees, and the Insolvency Practitioners Association of Australia have notified their members of it, there is no guarantee that a private trustee will not demand the entire balance of the account.

Sharkwatch is of the view that all private trustees should be required by law to comply with the provisions of this Practice Statement for consistency.  So if a private trustee demands that a financial institution hand over the entire balance of a bankrupt’s saved income pursuant to s.125 of the Act, then a complaint could be made to the Inspector-General in Bankruptcy, citing the Practice Statement, explaining the hardship that has resulted and asking why the client is being treated less favourably than bankrupts whose estates are being administered by the Official Trustee.

Savings accumulated during bankruptcy

Prior to bankruptcy, your client learnt to live frugally while struggling with a mountain of debt that ultimately proves insurmountable. Released from debt, the client continues with their frugal habits and after payment of their income contribution, still manages to put away a bit of their income in the bank for a rainy day.  After a while the account balance reaches a few thousand dollars. Could their bankruptcy trustee take that money?

From a lawyer’s point of view, savings is legally an asset even when those savings came from income. So if the bankrupt does not spend income, the saved income becomes an asset which can be taken by their trustee.

However, a better view is that where a bankrupt’s income is accumulated (“saved”), it remains unspent income, and should not be taken as an asset.  The saved income has already been subject to the contributions test and should be available for the bankrupt.  This is the view of ITSA and most private trustees.

In the case of Gillies; Ex Parte: the Official Trustee [1993] FCA 289, the bankrupt was a professional diver who had $22,000 unsecured creditors disclosed in his    statement of affairs.  Whilst a bankrupt, Mr Gillies worked and paid a contribution to his trustee from his earnings.  After he had been bankrupt nearly 2 years, Mr Gillies submitted a proposal for a composition to the Official Trustee in which he offered his savings of $4,000 to his creditors.  Mr Gillies explained that he had saved that amount of money from his diving work. He wanted the composition accepted so he could get an annulment of his bankruptcy and improve his employment prospects. 

The Official Trustee made an application to the Federal Court to determine whether Mr Gillies could offer the saved money to creditors or whether the $4,000   accumulated from his income was after-acquired property which vests in the Official Trustee pursuant to s.58(1)(a) and (6) Act. French J. held that as a bankrupt’s income does not vest in the trustee, the accumulated income of $4,000 “saved “ by Mr Gillies remained income and was not after-acquired property, so it could be offered to the creditors as a composition.

Assets acquired with savings accumulated during bankruptcy

In the above case of Gillies; Ex Parte: the Official Trustee, Justice French considered the possibility that the bankrupt might purchase an asset with the saved income, saying:

I am inclined to the view that assets purchased by a bankrupt with after-acquired income will, if not within any of the excluded categories in s.116(2), constitute property divisible among the creditors and vest in the trustee.

However, as that issue was not at stake in the case, His Honour made no finding on the issue and there does not appear to be any decided case law on the particular issue

So while accumulated income (‘savings’) is safe, there is a doubt about assets acquired with accumulated income during bankruptcy becoming the property of the trustee in bankruptcy, unless they are a specified exclusion.  Excluded property is listed in s.116(2) Act and includes the primary means of transport up to the prescribed limit, and household property listed in Bankruptcy Regulation 6.03, such as whitegoods, TV, home computer, furniture, etc. 

However, there are lots of desirable assets that are not protected. A second vehicle, boat, caravan, jewellery, share portfolio are examples of assets that are not protected and may be taken by the trustee in bankruptcy if acquired prior to discharge. 

It is important that clients are made aware that assets acquired with savings during bankruptcy could be claimed by the trustee. Should such a claim be made, the client should resist the claim and assert that as French J. held that income does not vest in the trustee, the protection afforded to accumulated income likewise applies to assets acquired with the accumulated income in the same manner as property acquired with other protected moneys such as personal injury compensation payments. (see s.116(3) of the Act. )

Assets acquired with savings accumulated during bankruptcy (continued)

To avoid the possibility of such a claim, the accumulated income could be held in a financial institution until after discharge or be used acquire something from the list of protected assets or perhaps use the money to pay rent in advance or take a holiday. 

If the trustee could claim such assets, the law in that regard would appear to be at odds with the concept of rehabilitation which is an essential element of bankruptcy, and would be seen as being most unfair to those bankrupts who are most serious about rehabilitation and want to save and buy an asset 

The need for law reform

To remove any doubt about the issue, it is considered that s.116(2) of the Act should be expanded to include a provision that accumulated income is not divisible property and be added to the items prescribed in s.116(2D)(a) of the Act as being “exempt money”

Also, the new Practice Statement should be incorporated into the Bankruptcy Act so private trustees are sure to behave consistently with the Official Trustee.  Also in the view of Sharkwatch, a bankrupt who lives frugally and manages to save money after payment of contributions, should be allowed to purchase assets with those savings without risk of the assets being taken by the trustee.

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   An Up-To Date Directory of Commonwealth-Funded Financial Counselling Services

 

* Note: All links open in a new browser window Australian Capital Territory
Care Inc	Canberra	02 6257 1788
New South Wales
Centacare - Sydney	Liverpool	02 9612 3444
Centacare - Wilcannia Forbes	Narromine	02 6889 4932
Christian Community Aid Service (CCAS)	West Ryde	02 9858 1377
Forster Neighbourhood Centre Inc.	Forster	02 6555 4351
Illawarra Legal Centre	Warrawong	02 4276 1939
Lifeline Macarthur	Smeaton Grange	02 4645 7247
Lifeline Newcastle and Hunter	Tighes Hill	02 4940 2000
Lismore & District Financial Counselling Service Inc.	Lismore	02 6622 2171
Mission Australia	Wollongong	02 4229 4711
Wagga Wagga Family Support Service Inc.	Wagga Wagga	02 6921 7675
Wesley Counselling Services	Sutherland	02 9951 5544
Western NSW Community Legal Centre Inc.	Dubbo	02 6884 8344
Other NSW services can be found at the FCAN website
Northern Territory
Anglicare, NT - Katherine	Katherine	08 8972 1571
Somerville Community Services Inc.	Wagaman	08 8920 4100
Tangentyere Council Inc.	Alice Springs	08 8951 4257
Queensland
Central Queensland Financial Counselling Inc.	Rockhampton	07 4922 5924
George Street  Neighbourhood Centre Inc.	Mackay	07 4957 2626
Lifeline Community Care Queensland (LCCQ)	Brisbane	07 3442 1550
LCCQ - Cairns Region	Cairns Region	07 4050 4955
LCCQ - Coral Coast	Bundaberg	07 4153 8400
LCCQ - Fraser District	Hervey Bay	07 4191 3100
LCCQ - Fraser District	Maryborough	07 4122 9000
LCCQ - Sunshine Coast	Caboolture	07 5495 1700
LCCQ - Sunshine Coast	Gympie	07 5482 7742
LCCQ - Sunshine Coast	Maroochydore	07 5443 5366
Townsville Community Legal Service Inc.	Townsville	07 4721 5511
Other Queensland services can be found at the FCQN  website
South Australia
Central Northern Adelaide Health Service Inc.	Modbury	08 8263 1155
Coober Pedy Multicultural Community Forum Inc	Coober Pedy	08 8672 3519
Northern Community Legal Service	Salisbury	08 8281 6911
Uniting Care Wesley  Adelaide Inc. - Adelaide	Adelaide	08 8202 5180
Uniting Care Wesley  Adelaide Inc. - Bowden	Bowden	08 8245 7100
Other South Australian services can be found at the SAFCA  website
Tasmania
Anglicare Tasmania Inc. Anglicare Financial Counslling Service	Burnie Devonport	03 6431 8804 03 6424 8581
	Hobart Launceston	1800 243 232 1800 243 232
Victoria
Anglicare — Victoria	Lilydale	03 9735 4188
Bass Coast Regional Health	Wonthaggi	03 5671 3278
Bendigo Community Health Services Inc.	Bendigo	03 5430 0500
Berry Street Victoria Ltd.	Eltham	03 9431 1799
Casey Cardinia Community Legal Service Inc	Dandenong	03 9793 1993
Djerriwarrh Health Services	Melton	03 8746 1100

   Bankruptcy Update

Anna Mandoki
AFCCRA Representative

New Inspector-General

After a lengthy selection process, Veronique Ingram was appointed earlier this year as the new Chief Executive of ITSA and Inspector-General in Bankruptcy. Ms Ingram has come from Treasury, and prior to that was Australian Ambassador and Permanent Representative to the OECD in Paris.

David Bergman, who was the acting Inspector-General until Ms Ingram’s appointment, has moved to the Attorney-General’s office. He will be head of the policy unit there.

Increase in Bankruptcies

There has been a large increase in bankruptcies in the March 09 quarter, compared with the same quarter last year. Nationally, total insolvencies had increased by 18% compared with the same quarter last year.

It appears that loss of employment combined with large numbers of credit cards are contributing to the increase. In addition, people are bankrupting on smaller amounts as increases in the cost of living mean that repayment of debt becomes increasingly unaffordable. Unfortunately it is likely that the effects of the global financial crisis are only just starting to be seen in bankruptcy numbers, and things are likely to get worse before they get better.

Perhaps in recognition of this, the 2009-10 Budget has allocated additional funding of $14.3 million to ITSA over the next 2 years. The Attorney-General, Robert McClelland, said in a media release: “ITSA plays an important role, particularly in these difficult economic times, by providing information and support for those Australians facing financial hardship or personal insolvency”.

Redundancy Payments

As it is likely that financial counsellors will be starting to see more clients with redundancy payments in coming months, here is a reminder of how they are treated in bankruptcy.

If the redundancy payment is received prior to bankruptcy, and the client subsequently bankrupts, any unspent portion of the redundancy payment counts as an asset that will vest in the Trustee. In other words, the Trustee can take any redundancy monies that remain unspent at the date of bankruptcy. However, ITSA will allow the client to keep enough of the payment to cover living expenses, if the person has no other source of income. This may be the case, for example, if the client cannot access Centrelink benefits for a period of time due to the redundancy payment.

If the redundancy payment is received during bankruptcy, it will be treated as income. It will count towards the assessment of liability for income contributions in the year in which it is received.

Stimulus Package Bonus Payments

The Government recently announced a $42 billion stimulus package, which includes a number of bonus payments to certain groups of taxpayers, farmers, families and students. The timing of these payments will determine their treatment in bankruptcy, as follows:

Bonus payments received during bankruptcy

ITSA has advised that the bonus payments will not be counted as either income or assets if received during bankruptcy. In other words, the bonuses will not count towards any assessment for income contributions, nor will they be considered an asset that vests in the Trustee.

There is one small qualification to this, which could affect some students who are currently receiving an Education Entry Payment (EEP) through Centrelink of $208. These students may be eligible to have a Training and Learning Bonus of $950 added to their EEP, giving a combined payment of $1158. In bankruptcy, the EEP component only of this combined payment (i.e. $208) will be considered to be income by ITSA. The balance of the combined payment (i.e. $950) will not be counted as either income or assets.

Bonus payments received prior to bankruptcy

Where the bonus payments are received prior to bankruptcy, any portion that remains unspent at the date of bankruptcy is an asset that will vest in the Trustee.

Savings during Bankruptcy

ITSA has clarified that any savings accumulated during bankruptcy from normal earnings (i.e. from protected income) cannot be taken by the Trustee. In technical terms, such savings are not considered to be an asset that would vest in the Trustee. It is recommended that any savings of this nature are accumulated in a bank account. That way, if any questions arise, the bankrupt should be able to prove that the accumulated savings came from protected wages. 

Trustee Remuneration Proposals

Last year, AFCCRA made a submission to ITSA on its draft proposals for changes to Trustee Remuneration. A number of other organisations also made strong       submissions, including Consumer Action.

ITSA has advised that the remuneration proposals have been accepted and will be implemented very shortly. The proposals include an increase in the minimum fee charged by Registered Trustees, however this fee will no longer be recoverable from debtors where there are insufficient funds in the estate to cover it. The changes will also mean improved access for debtors to the process for challenging Trustees’ fees.

The proposals did not address Creditors’ Petitions issued on small value debts, where a client’s estate can be substantially reduced by the inclusion of Trustee’s fees. This will continue to be a significant problem for a small number of our clients. AFCCRA will continue to press for changes in this area.

If you want to discuss any of the items above, or any other matters related to bankruptcy, please contact Anna Mandoki on amandoki@hotmail.com or mobile 0431 233 651 (I am probably easier to reach by email).

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   Round Up

South Australia

SAFCA Conference

The SAFCA Conference is a two-day event usually held every second year at The Lakes Function Centre, West Lakes. This year the conference will be held on September 14 and 15. The conference will cover a wide range of timely issues with various guest speakers, and the SAFCA Annual General Meeting will be held on the Tuesday.

Those wishing to attend should contact SAFCA by emailing a request to secretary@safca.info.

Queensland

Changes at Lifeline Fraser District

Colleen Jarvis from Lifeline Community Care Fraser District has written in to let us know that Tessa Evans has moved on from Lifeline Maryborough. Tessa has been replaced by Lucy Core, and Sharkwatch understands that Lifeline Fraser District is currently advertising for another financial counsellor.

Lifeline Fraser District have also moved their Main Administration office to Hervey Bay, so from now on all correspondence should be addressed to:

Lifeline Community Care Fraser District
PO Box 1294
Hervey Bay Qld  4655
Phone: 07 4191 3100

Western Australia

FCAWA Conference—dates for your diary

The Financial Counsellors’ Association of Western Australia (FCAWA) Annual Conference will be held this year from Monday October 19th to Friday October 23rd. For more details contact the FCAWA (info@financialcounsellors.org) or the Financial Counsellors Resource Project (FCRP) at fcrp@fcrp.org.au.

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News, views and information on what's happening in financial counselling around Australia

New South Wales

Jennifer Gracie, Betty Weule and Kevin Howard honoured by FCAN Awards

Three NSW financial counsellors were recently recognised for their long and excellent service to financial counselling in NSW. At the Financial Counsellors Association of NSW (FCAN) Annual General Meeting this May, Betty Weule from Sydney and Kevin Howard from Bathurst received Meritorious Service Awards for “Outstanding commitment to the advancement of Financial Counsellors in NSW and the demonstration of excellence in all fields of endeavour”.

Jennifer Gracie received the President’s Award for “Dedication and commitment to the values of the Association”.

Jennifer and Betty are well known to Sharkwatch readers. Jennifer is coordinator of the National Financial Counsellors’ Resource Service, is the FCAN Membership Secretary, and, more importantly, is responsible for supervising, resourcing, supporting and training a large number of Commonwealth funded financial counsellors from across Australia. Betty has been described as the ‘grandmother’ of financial counselling in Australia, is founder and former director of the Creditline financial counselling services, is co-author of the Bankruptcy Handbook, and currently runs various financial counsellor training courses across Australia.

Kevin Howard is less well known outside NSW but is a colourful figure within the state. Kevin has run numerous financial counselling courses in NSW, and many NSW veterans can remember being trained by Kevin in his tan shorts, winter or summer. After a long period with CreditLine Sydney, some of it working across NSW sorting out Homefund issues, Kevin now runs the CreditLine Central West financial counselling service at Bathurst and environs. Kevin is an ex-President of FCAN, and has been a tireless worker for the past two decades, lobbying for legislative changes, representing the interests of Australians from regional areas, and supporting the causes of financial counselling in NSW.

These awards are well deserved, and we at Sharkwatch can only applaud FCAN for honouring the contribution of these 3 outstanding financial counsellors. 

Creditline Canley Vale changes address

Creditline Canley Vale is now at the following address:

Creditline Canley Vale
62 Delamere St,
Canley Vale, NSW, 2166
Phone: (02) 8707-0877
Fax: (02) 8707-0876

For a period of time, Telstra will divert all calls coming in from the old number (02 9754-1600) to the new numbers, both for the telephone and for faxes.

Sharkwatch would like to offer our thanks to Bob Cruickshanks, Deputy Official Receiver for NSW. Bob went to a great deal of trouble checking and correcting the facts presented in this article and offered us extremely helpful advice regarding how these facts should be presented so that our advice was clear and correct.

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Can NSW FCs Help?

Researchers from the Children and Families Research Centre at Macquarie University are wanting to talk to financially disadvantaged families about their experiences in engaging with early childhood services. We are interested in conducting face-to-face interviews at a time and place convenient to the family. Our questions focus on whether or not families see early childhood services as important, their experiences in approaching and maintaining engagement with these services, and how their family could be better supported whilst their child/ren are in the early years.

Can you help us find families who:

• Have at least one child who is 3 – 5 years old (not yet started school)
  
• Live in one of the following areas in NSW: Mt Druitt, St Marys, Wollongong, Nowra, Taree, Kempsey, Tweed Heads, Bathurst, Broken Hill
  
• Experience economic hardship
  

• Participating families will receive a $20 Coles/Myer gift voucher and a book for their child.

If you are able to assist in finding families for this research please contact Dr Rebekah Grace (phone: 02 9850 9827, email: rebekah.grace@aces.mq.edu.au).

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   In the Media

Govt to crack down on predatory lending The Federal Government will release legislation later this month for new national laws to curb predatory and irresponsible lending.

The proposed new laws will apply to every form of financial service in Australia, including banks, credit unions and pay-day lenders.

The states and territories have previously agreed to sign over their powers to regulate credit markets.

Corporate Law Minister Nick Sherry says under the new system, lenders will be required to assess the capacity of borrowers to repay their debts before agreeing to provide credit.

"If you go to an individual broker, it will be in the first instance their responsibility. They will carry out the assessment," he said.

"If you go direct to a bank or a credit union or a building society, they will have the responsibility of carrying out the checks to ensure you've got a capacity to repay."

Senator Sherry says all financial institutions and individual lenders will have to undergo new checks before being granted a licence under the new system.

"Basically every form of financial service for the first time in Australia will be covered by a single national law, with proper regulation, licensing dispute resolution, and particularly a new responsible lending provision, which will ensure that people's capacity to pay will be thoroughly checked," he said.

ABC News, April 12, 2009

Unnecessary fees funding banks: Income down 30pc if "people were smart"

Original story by Gerard McManus

The Herald sun reports that banks made more than $1 billion last year from people exceeding credit limits, paying interest late and using ATMs. Bank fees grew by 8%.

The banks conceded their fee income would be slashed by 30 per cent if people banked smarter. The banks' "worst" customers gave them almost 10 per cent of their $11.5 billion in fee profits for 2008, according to a report by the Reserve Bank of Australia.

Although a number of people, including Treasurer Wayne Swan and Senator Steve Fielding, have called for banks to show restraint with such fees, the Herald Sun reports little remorse from bankers, with the  Australian Bankers Association saying that "simple changes in behaviour" could avoid a large number of bank fees. "By using your own bank's ATMs, ensuring accounts are not overdrawn and that your credit card is paid on time, money can be saved,"' said ABA chief David Bell.

Senator Fielding appeared less than impressed, however, saying that charging up to $50 for minor mistakes was profiteering from unsophisticated customers.

Herald Sun, May 22, 2009

Financial stress 'main cause of divorce' for women

Original story by Marissa Calligeros

The Brisbane Times reports on a survey from Relationships Australia which showed that financial stress was the cause of marital misery for 37% of women and 30% of men. Overall, the number of Australians who cited financial insecurity as a major stress on their relationships has doubled in two years!

Relationships Australia spokesperson, Anne Hollonds, said that combined figures for 'work pressures' and 'job insecurity' painted a grim picture of relationships under tremendous stress.

Brisbane psychologist Graeme King noted that women were particularly attuned to financial pressures because of their close link to their children’s needs.

Brisbane Times, October 12, 2008       

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